Nickel-based M&A activity an indicator the sector is on the rise

THE CONFERENCE CALLER: Australia’s nickel miners have been doing it pretty tough of late, however according to PCF Capital Group managing director Liam Twigger, there are positive signs the sector is on the rebound.

Twigger was addressing the opening session at the Paydirt 2016 Australian Nickel Conference in Perth.

He said one sure sign there were emerging green shoots for nickel is the renewed level of merger and acquisition activity in the sector – dominated in Australia by the numerous Western Australian nickel companies that are busy exploring, developing and mining.

Twigger said the nickel recovery was being underpinned by the broader characteristics which continued to define Australian mining companies – namely, their resilience and capacity to reinvent or transform themselves, “when the going gets tough”.

“Of all of the Australian mining sectors, it is the nickel miners that have had the hardest job,” Twigger said.

“Not only coping with a four year downturn that affected all metals, but also managing the impact of the global nickel pig iron business that saw a flood of low grade cheap nickel from the Philippines and Malaysia hit the market during this downturn.

“As a consequence, no stone has been left unturned by Australia’s nickel miners in the search for savings and efficiencies and in becoming more productive.

“Hence, in my view, the Australian nickel miners that operate today are the best of the best. 

“They have survived because they are excellent at what they do and they collectively represent a highly leveraged play to a global recovery. 

“We have already seen a positive response to the early signs of a global recovery with spot nickel up 20 per cent year to date and the average share price improvement of all nickel companies presenting at the Australian Nickel Conference this year, exceeds 44 per cent.”

Twigger said 2016 had already produced renewed activity in the nickel space with more than $330 million raised by Australian nickel companies, along with excellent exploration success by St George Mining (ASX: SGQ) at Mt Alexander and East Laverton (St George share price up 76 per cent) and Nickel West moving forward with its assessment of the world class Venus deposit.

“The missing ingredient and the best sign of a return of confidence is corporate M&A activity,” he said.

“The first cab out of the rank has been Independence Group with its pre-emptive move this month on Windward Resources to secure itself a dominant position in WA’s highly prospective Fraser Range in the southeast of that State.

“These are all very good signs and point to the winds of change finally getting behind the Australian nickel industry and underpinning the likelihood of a more robust performance for the sector over 2017.”